Form: 10-Q

Quarterly report [Sections 13 or 15(d)]

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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the Transition Period from              to             
 
Commission File Number 001-16707
Prudential Financial, Inc.
(Exact Name of Registrant as Specified in its Charter) 
New Jersey22-3703799
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification Number)
751 Broad Street
Newark, NJ 07102
(973) 802-6000
(Address and Telephone Number of Registrant’s Principal Executive Offices)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class Trading Symbols(s)Name of Each Exchange on Which Registered
Common Stock, Par Value $.01PRUNew York Stock Exchange
5.625% Junior Subordinated NotesPRSNew York Stock Exchange
4.125% Junior Subordinated NotesPFHNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of the Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerxAccelerated Filer
Non-accelerated FilerSmaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes    No  x

As of July 31, 2022, 372 million shares of the registrant’s Common Stock (par value $0.01) were outstanding.


Table of Contents
TABLE OF CONTENTS
 
  Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.



Table of Contents
Forward-Looking Statements

Certain of the statements included in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words such as “expects,” “believes,” “anticipates,” “includes,” “plans,” “assumes,” “estimates,” “projects,” “intends,” “should,” “will,” “shall” or variations of such words are generally part of forward-looking statements. Forward-looking statements are made based on management’s current expectations and beliefs concerning future developments and their potential effects upon Prudential Financial, Inc. and its subsidiaries. There can be no assurance that future developments affecting Prudential Financial, Inc. and its subsidiaries will be those anticipated by management. These forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements, including, among others: (1) the ongoing impact of the COVID-19 pandemic on the global economy, financial markets and our business; (2) losses on investments or financial contracts due to deterioration in credit quality or value, or counterparty default; (3) losses on insurance products due to mortality experience, morbidity experience or policyholder behavior experience that differs significantly from our expectations when we price our products; (4) changes in interest rates, equity prices and foreign currency exchange rates that may (a) adversely impact the profitability of our products, the value of separate accounts supporting these products or the value of assets we manage, (b) result in losses on derivatives we use to hedge risk or increase collateral posting requirements and (c) limit opportunities to invest at appropriate returns; (5) guarantees within certain of our products which are market sensitive and may decrease our earnings or increase the volatility of our results of operations or financial position; (6) liquidity needs resulting from (a) derivative collateral market exposure, (b) asset/liability mismatches, (c) the lack of available funding in the financial markets or (d) unexpected cash demands due to severe mortality calamity or lapse events; (7) financial or customer losses, or regulatory and legal actions, due to inadequate or failed processes or systems, external events, and human error or misconduct such as (a) disruption of our systems and data, (b) an information security breach, (c) a failure to protect the privacy of sensitive data, (d) reliance on third-parties or (e) labor and employment matters; (8) changes in the regulatory landscape, including related to (a) financial sector regulatory reform, (b) changes in tax laws, (c) fiduciary rules and other standards of care, (d) U.S. state insurance laws and developments regarding group-wide supervision, capital and reserves, (e) insurer capital standards outside the U.S. and (f) privacy and cybersecurity regulation; (9) technological changes which may adversely impact companies in our investment portfolio or cause insurance experience to deviate from our assumptions; (10) an inability to protect our intellectual property rights or claims of infringement of the intellectual property rights of others; (11) ratings downgrades; (12) market conditions that may adversely affect the sales or persistency of our products; (13) competition; (14) reputational damage; (15) the costs, effects, timing, or success of our plans to execute our strategy; and (16) the integration of Assurance IQ, LLC into our strategy. Prudential Financial, Inc. does not undertake to update any particular forward-looking statement included in this document. See “Risk Factors” included in the Annual Report on Form 10-K for the year ended December 31, 2021 for discussion of certain risks relating to our businesses and investment in our securities.












































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PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
PRUDENTIAL FINANCIAL, INC.
Unaudited Interim Consolidated Statements of Financial Position
June 30, 2022 and December 31, 2021 (in millions, except share amounts)
June 30,
2022
December 31,
2021
ASSETS
Fixed maturities, available-for-sale, at fair value (allowance for credit losses: 2022-$109; 2021-$114) (amortized cost: 2022-$319,003; 2021-$333,459)(1)
$306,655 $372,410 
Fixed maturities, held-to-maturity, at amortized cost, net of allowance for credit losses (allowance for credit losses: 2022-$3; 2021-$5) (fair value: 2022-$1,475; 2021-$1,803)(1)
1,280 1,514 
Fixed maturities, trading, at fair value (amortized cost: 2022-$7,354; 2021-$8,741)(1)
6,272 8,823 
Assets supporting experience-rated contractholder liabilities, at fair value2,785 3,358 
Equity securities, at fair value (cost: 2022-$4,502; 2021-$5,815)(1)
6,402 8,574 
Commercial mortgage and other loans (net of $196 and $119 allowance for credit losses; includes $303 and $1,263 of loans measured at fair value under the fair value option at June 30, 2022 and December 31, 2021, respectively)(1)
56,840 58,666 
Policy loans10,024 10,386 
Other invested assets (net of $1 and $2 allowance for credit losses; includes $6,743 and $8,046 of assets measured at fair value at June 30, 2022 and December 31, 2021, respectively)(1)
21,310 21,833 
Short-term investments (net of allowance for credit losses: 2022-$0; 2021-$0)
6,828 6,635 
Total investments418,396 492,199 
Cash and cash equivalents(1)14,359 12,888 
Accrued investment income(1)2,798 2,855 
Deferred policy acquisition costs18,632 18,192 
Value of business acquired571 771 
Income tax assets696 0 
Assets held-for-sale(2) 0 153,793 
Other assets (net of allowance for credit losses: 2022-$21; 2021-$19)(1)
34,534 10,739 
Separate account assets205,613 246,145 
TOTAL ASSETS$695,599 $937,582 
LIABILITIES AND EQUITY
LIABILITIES
Future policy benefits$275,096 $290,784 
Policyholders’ account balances130,352 122,633 
Policyholders’ dividends2,256 8,731 
Securities sold under agreements to repurchase8,006 10,185 
Cash collateral for loaned securities5,741 4,251 
Income tax liabilities0 9,513 
Short-term debt558 722 
Long-term debt19,612 18,622 
Liabilities held-for-sale(2) 0 151,359 
Other liabilities (including allowance for credit losses: 2022-$18; 2021-$21 )(1)
19,215 11,755 
Notes issued by consolidated variable interest entities(1)232 274 
Separate account liabilities205,613 246,145 
Total liabilities666,681 874,974 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 14)
EQUITY
Preferred Stock ($0.01 par value; 10,000,000 shares authorized; none issued)
0 0 
Common Stock ($0.01 par value; 1,500,000,000 shares authorized; 666,305,189 shares issued as of both June 30, 2022 and December 31, 2021)
6 6 
Additional paid-in capital25,661 25,732 
Common Stock held in treasury, at cost (293,684,307 and 290,018,851 shares at June 30, 2022 and December 31, 2021, respectively)
(22,391)(21,838)
Accumulated other comprehensive income (loss)(10,178)21,324 
Retained earnings35,137 36,652 
Total Prudential Financial, Inc. equity28,235 61,876 
Noncontrolling interests683 732 
Total equity28,918 62,608 
TOTAL LIABILITIES AND EQUITY$695,599 $937,582 
__________
(1)See Note 4 for details of balances associated with variable interest entities.
(2)See Note 1 for details of the assets and liabilities classified as “held-for-sale”.

See Notes to Unaudited Interim Consolidated Financial Statements
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PRUDENTIAL FINANCIAL, INC.
Unaudited Interim Consolidated Statements of Operations
Three and Six Months Ended June 30, 2022 and 2021 (in millions, except per share amounts)
 
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
REVENUES
Premiums$7,112 $6,779 $15,064 $14,322 
Policy charges and fee income1,551 1,400 3,010 2,890 
Net investment income3,938 4,552 8,296 8,934 
Asset management and service fees987 1,198 2,120 2,374 
Other income (loss)580 1,353 (791)1,635 
Realized investment gains (losses), net(1,147)635 (1,463)2,714 
Total revenues13,021 15,917 26,236 32,869 
BENEFITS AND EXPENSES
Policyholders’ benefits9,612 7,615 18,480 15,725 
Interest credited to policyholders’ account balances665 1,074 834 1,842 
Dividends to policyholders(207)833 28 1,437 
Amortization of deferred policy acquisition costs581 392 1,428 1,133 
General and administrative expenses2,881 3,230 6,092 6,545 
Total benefits and expenses13,532 13,144 26,862 26,682 
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF OPERATING JOINT VENTURES
(511)2,773 (626)6,187 
Total income tax expense (benefit)11 609 (58)1,245 
INCOME (LOSS) BEFORE EQUITY IN EARNINGS OF OPERATING JOINT VENTURES
(522)2,164 (568)4,942 
Equity in earnings of operating joint ventures, net of taxes(50)19 (48)45 
NET INCOME (LOSS)(572)2,183 (616)4,987 
Less: Income (loss) attributable to noncontrolling interests(7)25 (20)1 
NET INCOME (LOSS) ATTRIBUTABLE TO PRUDENTIAL FINANCIAL, INC.$(565)$2,158 $(596)$4,986 
EARNINGS PER SHARE
Basic earnings per share-Common Stock:
Net income (loss) attributable to Prudential Financial, Inc.$(1.53)$5.44 $(1.62)$12.47 
Diluted earnings per share-Common Stock:
Net income (loss) attributable to Prudential Financial, Inc.$(1.53)$5.40 $(1.62)$12.39 






See Notes to Unaudited Interim Consolidated Financial Statements
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PRUDENTIAL FINANCIAL, INC.
Unaudited Interim Consolidated Statements of Comprehensive Income
Three and Six Months Ended June 30, 2022 and 2021 (in millions)
 
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
NET INCOME (LOSS)$(572)$2,183 $(616)$4,987 
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments for the period
(984)(48)(1,336)(729)
Net unrealized investment gains (losses)(17,740)5,353 (39,510)(8,775)
Defined benefit pension and postretirement unrecognized periodic benefit (cost)
388 74 453 170 
Total(18,336)5,379 (40,393)(9,334)
Less: Income tax expense (benefit) related to other comprehensive income (loss)
(3,953)1,319 (8,890)(1,857)
Other comprehensive income (loss), net of taxes(14,383)4,060 (31,503)(7,477)
Comprehensive income (loss)(14,955)6,243 (32,119)(2,490)
Less: Comprehensive income (loss) attributable to noncontrolling interests
(7)27 (21)(15)
Comprehensive income (loss) attributable to Prudential Financial, Inc.
$(14,948)$6,216 $(32,098)$(2,475)
 



See Notes to Unaudited Interim Consolidated Financial Statements
 
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PRUDENTIAL FINANCIAL, INC.
Unaudited Interim Consolidated Statements of Equity
Six Months Ended June 30, 2022, and 2021 (in millions)
 
 Prudential Financial, Inc. Equity  
 Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Common
Stock
Held In
Treasury
Accumulated
Other
Comprehensive
Income (Loss)
Total
Prudential
Financial, Inc.
Equity
Noncontrolling
Interests
Total
Equity
Balance, December 31, 2021$6 $25,732 $36,652 $(21,838)$21,324 $61,876 $732 $62,608 
Common Stock acquired(375)(375)(375)
Contributions from noncontrolling interests3 3 
Distributions to noncontrolling interests(21)(21)
Stock-based compensation programs(73)162 89 89 
Dividends declared on Common Stock(462)(462)(462)
Comprehensive income:
Net income (loss)(31)(31)(13)(44)
Other comprehensive income (loss), net of tax(17,119)(17,119)(1)(17,120)
Total comprehensive income (loss)(17,150)(14)(17,164)
Balance, March 31, 20226 25,659 36,159 (22,051)4,205 43,978 700 44,678 
Common Stock acquired(375)(375)(375)
Contributions from noncontrolling interests26 26 
Distributions to noncontrolling interests(36)(36)
Stock-based compensation programs2 35 37 37 
Dividends declared on Common Stock(457)(457)(457)
Comprehensive income:
Net income (loss)(565)(565)(7)(572)
Other comprehensive income (loss), net of tax(14,383)(14,383)0 (14,383)
Total comprehensive income (loss)(14,948)(7)(14,955)
Balance, June 30, 2022$6 $25,661 $35,137 $(22,391)$(10,178)$28,235 $683 $28,918 

 Prudential Financial, Inc. Equity  
 Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Common
Stock
Held In
Treasury
Accumulated
Other
Comprehensive
Income (Loss)
Total
Prudential
Financial, Inc.
Equity
Noncontrolling
Interests
Total
Equity
Balance, December 31, 2020$6 $25,584 $30,749 $(19,652)$30,738 $67,425 $785 $68,210 
Common Stock acquired(375)(375)(375)
Contributions from noncontrolling interests3 3 
Distributions to noncontrolling interests(6)(6)
Stock-based compensation programs(5)149 144 144 
Dividends declared on Common Stock(467)(467)(467)
Comprehensive income:
Net income (loss)2,828 2,828 (24)2,804 
Other comprehensive income (loss), net of tax(11,519)(11,519)(18)(11,537)
Total comprehensive income (loss)(8,691)(42)(8,733)
Balance, March 31, 20216 25,579 33,110 (19,878)19,219 58,036 740 58,776 
Common Stock acquired(875)(875)(875)
Contributions from noncontrolling interests9 9 
Distributions to noncontrolling interests(22)(22)
Consolidations (deconsolidations) of noncontrolling interests(118)(118)
Stock-based compensation programs65 66 131 131 
Dividends declared on Common Stock(460)(460)(460)
Comprehensive income:
Net income (loss)2,158 2,158 25 2,183 
Other comprehensive income (loss), net of tax4,058 4,058 2 4,060 
Total comprehensive income (loss)6,216 27 6,243 
Balance, June 30, 2021$6 $25,644 $34,808 $(20,687)$23,277 $63,048 $636 $63,684 

See Notes to Unaudited Interim Consolidated Financial Statements
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PRUDENTIAL FINANCIAL, INC.
Unaudited Interim Consolidated Statements of Cash Flows
Six Months Ended June 30, 2022 and 2021 (in millions)
Six Months Ended
June 30,
20222021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)$(616)$4,987 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Realized investment (gains) losses, net1,463 (2,714)
Policy charges and fee income(1,334)(1,142)
Interest credited to policyholders’ account balances834 1,842 
Depreciation and amortization188 45 
(Gains) losses on assets supporting experience-rated contractholder liabilities, net1,080 89 
Change in:
Deferred policy acquisition costs324 (167)
Future policy benefits and other insurance liabilities4,094 2,663 
Income taxes(1,371)221 
Derivatives, net(2,301)(3,466)
Other, net(1)(859)(1,296)
Cash flows from (used in) operating activities1,502 1,062 
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale/maturity/prepayment of:
Fixed maturities, available-for-sale28,636 34,913 
Fixed maturities, held-to-maturity17 144 
Fixed maturities, trading1,206 2,141 
Assets supporting experience-rated contractholder liabilities10,235 9,048 
Equity securities2,535 2,266 
Commercial mortgage and other loans3,004 3,739 
Policy loans869 1,091 
Other invested assets1,155 1,319 
Short-term investments20,616 15,998 
Payments for the purchase/origination of:
Fixed maturities, available-for-sale(33,244)(29,501)
Fixed maturities, trading(225)(5,345)
Assets supporting experience-rated contractholder liabilities(10,592)(9,727)
Equity securities(1,361)(1,923)
Commercial mortgage and other loans(2,778)(3,554)
Policy loans(593)(676)
Other invested assets(1,320)(1,426)
Short-term investments(20,079)(14,552)
Dispositions, net of cash disposed(2)422 132 
Derivatives, net(1,802)(776)
Other, net59 (149)
Cash flows from (used in) investing activities(3,240)3,162 
CASH FLOWS FROM FINANCING ACTIVITIES
Policyholders’ account deposits13,969 15,182 
Policyholders’ account withdrawals(12,764)(15,575)
Net change in securities sold under agreements to repurchase and cash collateral for loaned securities(483)(405)
Cash dividends paid on Common Stock(921)(926)
Net change in financing arrangements (maturities 90 days or less)(258)73 
Common Stock acquired(738)(1,238)
Common Stock reissued for exercise of stock options99 113 
Proceeds from the issuance of debt (maturities longer than 90 days)1,024 71 
Repayments of debt (maturities longer than 90 days)(124)(173)
Other, net(3)1,660 211 
Cash flows from (used in) financing activities1,464 (2,667)
Effect of foreign exchange rate changes on cash balances(317)(217)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS INCLUDING BALANCES CLASSIFIED AS HELD-FOR-SALE(591)1,340 
NET CHANGE IN CASH BALANCES CLASSIFIED AS HELD-FOR-SALE(2)(2,071)0 
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS1,480 1,340 
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF YEAR12,934 13,855 
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, END OF PERIOD$14,414 $15,195 

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PRUDENTIAL FINANCIAL, INC.
Unaudited Interim Consolidated Statements of Cash Flows
Six Months Ended June 30, 2022 and 2021 (in millions)

Six Months Ended
June 30,
20222021
HELD-FOR-SALE CLASSIFICATION(2)
Change in assets classified as held-for-sale$(153,793)$0 
Change in liabilities classified as held-for-sale(151,359)0 
Change in net assets classified as held-for-sale$(2,434)$0 
NON-CASH TRANSACTIONS DURING THE PERIOD
Treasury Stock shares issued for stock-based compensation programs$229 $131 
Significant Pension Risk Transfer transactions:
Assets received, excluding cash and cash equivalents$502 $0 
Liabilities assumed505 0 
Net cash received$3 $0 
RECONCILIATION TO THE UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Cash and cash equivalents$14,359 $15,145 
Restricted cash and restricted cash equivalents (included in “Other assets”)55 50 
Total cash, cash equivalents, restricted cash and restricted cash equivalents$14,414 $15,195 
__________
(1)The amount for the six months ended June 30, 2022 includes the recognized gains on the sales of Prudential Annuities Life Assurance Corporation (“PALAC”) and the Full Service Retirement business, which were completed on April 1, 2022. See Note 1 for additional information on these dispositions.
(2)See Note 1 for more information on the dispositions.
(3)The amount for the six months ended June 30, 2022 includes approximately $1.6 billion from a secured borrowing related to the PALAC disposition. See Note 1 for more information.


See Notes to Unaudited Interim Consolidated Financial Statements
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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements

1. BUSINESS AND BASIS OF PRESENTATION
 
Prudential Financial, Inc. (“Prudential Financial”) and its subsidiaries (collectively, “Prudential” or the “Company”) provide a wide range of insurance, investment management, and other financial products and services to both individual and institutional customers throughout the United States and in many other countries. Principal products and services provided include life insurance, annuities, retirement solutions, mutual funds and investment management.

In October 2021, the Company announced the creation of Retirement Strategies, a new U.S. business that would serve the retirement needs of both its institutional and individual customers by bringing the institutional investment and pension solutions offered through the Retirement business together with the financial solutions and capabilities of the Individual Annuities business. As of the second quarter of 2022, this new structure has been fully operationalized; therefore, the results of the former Retirement segment (now known as the “Institutional Retirement Strategies” operating segment) and the former Individual Annuities segment (now known as the “Individual Retirement Strategies” operating segment) have been aggregated into the Retirement Strategies segment. Prior periods have been updated to conform to this new presentation.

Consequently, the Company’s principal operations now consist of PGIM (the Company’s global investment management business), the U.S. Businesses (consisting of the Retirement Strategies, Group Insurance, Individual Life and Assurance IQ businesses), the International Businesses, the Closed Block division, and the Company’s Corporate and Other operations. The Closed Block division is accounted for as a divested business that is reported separately from the Divested and Run-off Businesses that are included in Corporate and Other operations. Divested and Run-off Businesses consist of businesses that have been, or will be, sold or exited, including businesses that have been placed in wind-down status that do not qualify for “discontinued operations” accounting treatment under U.S. GAAP. The Company’s Corporate and Other operations include corporate items and initiatives that are not allocated to business segments as well as the Divested and Run-off Businesses described above.
 
Basis of Presentation
 
The Unaudited Interim Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) on a basis consistent with reporting interim financial information in accordance with instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”). The Unaudited Interim Consolidated Financial Statements include the accounts of Prudential Financial, entities over which the Company exercises control, including majority-owned subsidiaries and minority-owned entities such as limited partnerships in which the Company is the general partner and variable interest entities (“VIEs”) in which the Company is considered the primary beneficiary. See Note 4 for additional information on the Company’s consolidated variable interest entities. Intercompany balances and transactions have been eliminated.

In the opinion of management, all adjustments necessary for a fair statement of the financial position and results of operations have been made. All such adjustments are of a normal, recurring nature. Interim results are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with the Company’s Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Use of Estimates
 
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
The most significant estimates include those used in determining deferred policy acquisition costs (“DAC”) and related amortization; policyholders’ account balances related to the fair value of embedded derivative instruments associated with the index-linked features of certain universal life and annuity products; value of business acquired (“VOBA”) and its amortization; amortization of deferred sales inducements (“DSI”); measurement of goodwill and any related impairment; valuation of investments including derivatives, measurement of allowance for credit losses, and the recognition of other-than-temporary impairments (“OTTI”); future policy benefits including guarantees; pension and other postretirement benefits; provision for
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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
income taxes and valuation of deferred tax assets; and accruals for contingent liabilities, including estimates for losses in connection with unresolved legal and regulatory matters.

Out of Period Adjustments

In the second quarter of 2022, the Company recorded out of period adjustments within the Individual Life business, resulting in an aggregate net benefit of $125 million to “Income (loss) from continuing operations before income taxes and equity in earnings of operating joint ventures” for the second quarter of 2022. The adjustments included (i) a $230 million benefit from a reduction to cost of reinsurance liabilities related to universal and variable life products; (ii) an $80 million net benefit from a reduction in reserves, partially offset by an increase in cost of reinsurance liabilities, for certain universal and variable universal life products; and (iii) a $185 million charge from an increase in reserves for certain universal life insurance products.

The impact of these out of period adjustments, individually and in the aggregate, was not material to any previously reported quarterly or annual financial statements and is not expected to be material to the 2022 annual financial statements. See Note 13 for additional information on the impact of these adjustments to the Company’s operating segments.

Reclassifications
 
Certain amounts in prior periods have been reclassified to conform to the current period presentation.

COVID-19

Since the first quarter of 2020, the novel coronavirus (“COVID-19”) has resulted in extreme stress and disruption in the global economy and financial markets. While markets subsequently rebounded, the pandemic has adversely impacted, and may continue to adversely impact, the Company’s results of operations, financial condition and cash flows. Due to the highly uncertain nature of these conditions, it is not possible to estimate the ultimate impacts at this time. The risks have manifested, and may continue to manifest, in the Company’s financial statements in the areas of, among others, (i) insurance liabilities and related balances: potential changes to assumptions regarding investment returns, mortality, morbidity and policyholder behavior which are reflected in our insurance liabilities and certain related balances (e.g., DAC, VOBA, etc.) and; (ii) investments: increased risk of loss on our investments due to default or deterioration in credit quality or value. The Company cannot predict what impact the COVID-19 pandemic will ultimately have on its businesses.

Business Dispositions

Prudential Annuities Life Assurance Corporation, Representing a Portion of Individual Annuities’ Traditional Variable Annuity Block of Business

On April 1, 2022, the Company completed the sale of Prudential Annuities Life Assurance Corporation (“PALAC”), a wholly owned subsidiary, representing a portion of its in-force traditional variable annuity block of business, to Fortitude Group Holdings, LLC (“Fortitude”). The PALAC block primarily consisted of non-New York traditional variable annuities with guaranteed living benefits that were issued prior to 2011, which constituted approximately $30 billion of Prudential’s total in-force individual annuity account values at the closing of the transaction. The Company, through co-insurance and modified co-insurance agreements, has retained the results of certain variable annuities, indexed annuities, and fixed annuities with a guaranteed lifetime withdrawal income feature issued by PALAC.

The Company recognized a pre-tax gain on sale of $852 million in the second quarter of 2022 within “Other income”. The gain is included in adjusted operating income within the Retirement Strategies segment.

The economics of approximately $1.7 billion of commercial mortgage and other loans and fixed maturities, available-for-sale, held by PALAC, have been transferred to Fortitude via participation agreements. The Company has retained legal ownership and control over the participated assets, and they cannot be freely pledged or exchanged by Fortitude. This transfer did not meet the requirements of sale accounting and is therefore accounted for as a secured borrowing. As a result, these assets continue to be reported on the Company’s Unaudited Consolidated Statements of Financial Position along with the recognition of a corresponding secured borrowing liability in “Other liabilities”.

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
Full Service Retirement Business

On April 1, 2022, the Company completed the sale of its Full Service Retirement business to Great-West Life & Annuity Insurance Company (“Great-West”), primarily through a combination of (i) the sale of all of the outstanding equity interests of certain legal entities, including Prudential Retirement Insurance and Annuity Company (“PRIAC”); (ii) the ceding of certain insurance policies through reinsurance; and (iii) the sale, transfer and/or novation of certain in-scope contracts and brokerage accounts.

The Company recognized a net pre-tax gain of $690 million in the second quarter of 2022, composed of (i) an $890 million gain recorded in “Other income”; (ii) $150 million of realized losses recorded in “Realized investment gains (losses), net”, related to assets transferred as part of the reinsurance of certain retained policies to Great-West; and (iii) $50 million of indirect expenses and charges recorded in “General and administrative expenses” on the Unaudited Interim Consolidated Statements of Operations. The net gain is excluded from adjusted operating income and reported within Divested Businesses as part of Corporate and Other operations. In addition, the Company recognized a deferred gain of $495 million for the ceding of certain insurance policies through reinsurance to Great-West, which will be recognized in income over the term of the ceded policies. The transaction agreement includes a post-closing adjustment provision. Any such adjustment will be finalized by the fourth quarter of 2022 and could impact the amount of the pre-tax gain referred to above. The Company does not expect that any such adjustment will have a material impact on the Company’s results.

Excluding the gain on sale recognized in the second quarter of 2022, the Full Service Retirement business generated pre-tax income/(loss) of $0 million and ($206) million for the three and six months ended June 30, 2022, respectively, and $84 million and $99 million for the three and six months ended June 30, 2021, respectively. These amounts exclude the impact of overhead costs retained in the Company’s Corporate and Other operations and not transferred to Great-West.

The assets and liabilities of both the Full Service Retirement business and PALAC were classified as held-for-sale prior to completion of these dispositions. The table below reflects their carrying amounts as of December 31, 2021:

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
December 31, 2021
Retirement
Full Service
Individual
Annuities
PALAC
Total
(in millions)
Assets held-for-sale:
Fixed maturities, available-for-sale, at fair value(1)$4,798 $8,771 $13,569 
Fixed maturities, trading, at fair value374 27 401 
Assets supporting experience-rated contractholder liabilities, at fair value18,818 0 18,818 
Equity securities0 322 322 
Commercial mortgage and other loans(1)5,068 1,497 6,565 
Policy loans0 12 12 
Other invested assets10 94 104 
Short-term investments 3 875 878 
Cash and cash equivalents56 2,015 2,071 
Accrued investment income160 61 221 
Deferred policy acquisition costs100 1,097 1,197 
Value of business acquired185 30 215 
Other assets(2)674 10,644 11,318 
Separate account assets65,835 32,267 98,102 
Total assets held-for-sale$96,081 $57,712 $153,793 
Liabilities held-for-sale:
Future policy benefits$157 $4,505 $4,662 
Policyholders’ account balances28,164 11,750 39,914 
Other liabilities374 8,307 8,681 
Separate account liabilities65,835 32,267 98,102 
Total liabilities held-for-sale$94,530 $56,829 $151,359 
__________
(1)Includes “Fixed maturities, available-for-sale, at fair value” with an allowance for credit losses of $1 million and “Commercial mortgage and other loans” net of allowance for credit losses of $15 million as of December 31, 2021, respectively.
(2)Includes $455 million of goodwill associated with the Retirement Full Service business as of December 31, 2021.

The Prudential Life Insurance Company of Taiwan Inc.

In June 2021, Prudential International Insurance Holdings, Ltd. (“PIIH”), a subsidiary of Prudential Financial, completed the sale of The Prudential Life Insurance Company of Taiwan Inc. (“POT”) to Taishin Financial Holding Co, Ltd. (the “Buyer”) for cash consideration of approximately NT5.5 billion, equal to approximately $200 million at then current exchange rates, and contingent consideration with a fair value of approximately $97 million as of June 30, 2022. The fair value of the contingent consideration is tied to the level of yields for the 10-year Taiwanese Government bond for two years after the signing of the transaction and can result in a maximum payout of $100 million if yields increase by 40 basis points. In connection with the transaction, the Company recognized a liability with a fair value of approximately $33 million as of June 30, 2022, representing its financial guarantee of certain insurance obligations of POT.

The after-tax loss on the sale of POT was approximately $400 million, of which approximately $350 million was recorded during 2020, and approximately $50 million was recorded during 2021.

Prior to the sale, in the third quarter of 2020, the Company transferred the results of POT and the anticipated impact of its sale from the International Businesses segment to Divested and Run-off Businesses within Corporate & Other operations. Prior period amounts were restated at that time, which impacted both segment reporting and adjusted operating income, but did not impact results reported under GAAP.
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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
Pramerica SGR (PGIM Italy Joint Venture)

In March 2021, the Company sold its 35% ownership stake in Pramerica SGR, PGIM’s asset management joint venture in Italy, to its partner UBI Banca, which was acquired in 2020 by Intesa Sanpaolo Group. The after-tax gain on the sale of Pramerica SGR was approximately $330 million, which was recognized in adjusted operating income in the first quarter of 2021.

2. SIGNIFICANT ACCOUNTING POLICIES AND PRONOUNCEMENTS

Recent Accounting Pronouncements

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates (“ASUs”) to the FASB Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of all ASUs. ASUs listed below include those that have been adopted during the current fiscal year and/or those that have been issued but not yet adopted as of June 30, 2022, and as of the date of this filing. ASUs not listed below were assessed and determined to be either not applicable or not material.

ASU issued but not yet adopted as of June 30, 2022 ASU 2018-12

ASU 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, was issued by the FASB on August 15, 2018, and was amended by ASU 2019-09, Financial Services - Insurance (Topic 944): Effective Date, issued in October 2019, and ASU 2020-11, Financial Services—Insurance (Topic 944): Effective Date and Early Application, issued in November 2020. The Company will adopt ASU 2018-12 effective January 1, 2023 using the modified retrospective transition method where permitted, and apply the guidance as of January 1, 2021 (and record transition adjustments as of January 1, 2021) in the 2023 financial statements.

The Company has an established governance framework to manage the implementation of the standard. The Company’s implementation efforts continue to progress including, but not limited to, implementing refinements to key accounting policy decisions, modifications to actuarial valuation models, updates to data sourcing capabilities, automation of key financial reporting and analytical processes and updates to internal control over financial reporting.

ASU 2018-12 will impact, at least to some extent, the accounting and disclosure requirements for all long-duration insurance and investment contracts issued by the Company. The Company expects the standard to have a significant financial impact on its Consolidated Financial Statements and will significantly increase disclosures. As of the January 1, 2021 transition date, the Company estimates that the implementation of the standard will result in a decrease to “Retained earnings” of approximately $2 billion to $3 billion primarily from reclassifying the cumulative effect of changes in non-performance risk from “Retained earnings” to “Accumulated other comprehensive income” (“AOCI”) and other changes in reserves, and will result in a decrease to AOCI of approximately $40 billion to $45 billion primarily from remeasuring in-force contract liabilities using upper-medium grade fixed income instrument yields as of the transition date. As of December 31, 2021, these estimates decline to a decrease to “Retained earnings” of approximately $1 billion to $2 billion and a decrease to AOCI of approximately $28 billion to $33 billion primarily due to the increase in interest rates during 2021. In addition to the impacts to the balance sheet, the Company also expects an impact to the pattern of earnings emergence following the transition date. Outlined below are four key areas of change, although there are other less significant policy changes not noted below.

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
ASU 2018-12 Amended TopicDescriptionMethod of adoptionEffect on the financial statements or other significant matters
Cash flow assumptions used to measure the liability for future policy benefits for non-participating traditional and limited-pay insurance products

Requires an entity to review and, if necessary, update the cash flow assumptions used to measure the liability for future policy benefits, for both changes in future assumptions and actual experience, at least annually using a retrospective update method with a cumulative catch-up adjustment recorded in a separate line item in the Consolidated Statements of Operations.
An entity may choose one of two adoption methods for the liability for future policy benefits: (1) a modified retrospective transition method whereby the entity may choose to apply the amendments to contracts in force as of the beginning of the prior year (if early adoption is elected) or as of the beginning of the earliest period presented on the basis of their existing carrying amounts, adjusted for the removal of any related amounts in AOCI or (2) a full retrospective transition method.
The Company will adopt this guidance effective January 1, 2023 using the modified retrospective transition method. As a result of the modified retrospective transition method, the Company expects the vast majority of the impact of updating cash flow assumptions as of the transition date to be reflected in the pattern of earnings in subsequent periods. The Company also expects some decrease to “Retained earnings” upon adoption from cash flow assumption updates isolated to the impact on certain issue year cohorts.
Discount rate assumption used to measure the liability for future policy benefits for non-participating traditional and limited-pay insurance products

Requires discount rate assumptions to be based on an upper-medium grade fixed income instrument yield, which will be updated each quarter with the impact recorded through OCI. An entity shall maximize the use of relevant observable information and minimize the use of unobservable information in determining the discount rate assumptions.
As noted above, an entity may choose either a modified retrospective transition method or full retrospective transition method for the liability for future policy benefits. Under either method, for balance sheet remeasurement purposes, the liability for future policy benefits will be remeasured using current discount rates as of either the beginning of the prior year (if early adoption is elected) or the beginning of the earliest period presented with the impact recorded as a cumulative effect adjustment to AOCI.
As noted above, the Company will adopt the guidance for the liability for future policy benefits effective January 1, 2023 using the modified retrospective transition method. The Company expects a decrease to AOCI as a result of remeasuring in-force contract liabilities using upper-medium grade fixed income instrument yields as of the adoption date. The adjustment will largely reflect the difference between discount rates locked-in at contract inception versus discount rates as of the adoption date.
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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
ASU 2018-12 Amended TopicDescriptionMethod of adoptionEffect on the financial statements or other significant matters
Amortization of deferred acquisition costs (DAC) and other balances
Requires DAC and other balances, such as unearned revenue reserves and DSI, to be amortized on a constant level basis over the expected term of the related contract, independent of expected profitability.
An entity may apply one of two adoption methods: (1) a modified retrospective transition method whereby the entity may choose to apply the amendments to contracts in force as of the beginning of the prior year (if early adoption is elected) or as of the beginning of the earliest period presented on the basis of their existing carrying amounts, adjusted for the removal of any related amounts in AOCI or (2) if an entity chooses a full retrospective transition method for its liability for future policy benefits, as described above, it is required to also use a full retrospective transition method for DAC and other balances.
The Company will adopt this guidance effective January 1, 2023 using the modified retrospective transition method. Under the modified retrospective transition method, the Company does not expect a significant impact to the balance sheet, other than the impact of the removal of any related amounts in AOCI.
Market Risk Benefits (“MRB”)
Requires an entity to measure all market risk benefits (e.g., living benefit and death benefit guarantees associated with variable annuities) at fair value, and record MRB assets and liabilities separately on the Consolidated Statements of Financial Position. Changes in fair value of market risk benefits are recorded in net income, except for the portion of the change in MRB liabilities attributable to changes in an entity’s NPR, which is recognized in OCI.
An entity shall adopt the guidance for market risk benefits using the retrospective transition method, which includes a cumulative effect adjustment on the balance sheet as of either the beginning of prior year (if early adoption is elected) or the beginning of the earliest period presented. An entity shall maximize the use of relevant observable information and minimize the use of unobservable information in determining the balance of the market risk benefits upon adoption.
The Company will adopt this guidance effective January 1, 2023 using the retrospective transition method. Upon adoption, the Company expects a decrease to “Retained earnings” and offsetting increase to AOCI from reclassifying the cumulative effect of changes in NPR from retained earnings to AOCI. There will also be an impact to “Retained earnings” for the difference between the fair value and carrying value of benefits not currently measured at fair value (e.g., guaranteed minimum death benefits on variable annuities).

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
Other ASU issued but not yet adopted as of June 30, 2022

StandardDescriptionEffective date and method of adoptionEffect on the financial statements or other significant matters
 ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosure

This ASU eliminates the accounting guidance for Troubled Debt Restructurings (“TDR”) for creditors and adds enhanced disclosure requirements for certain loan refinancings and restructurings by creditors made to borrowers experiencing financial difficulty. Following adoption of the ASU, all loan refinancings and restructurings are subject to the modification guidance in ASC 310-20.
This ASU also amends the guidance on the vintage disclosures to require disclosure of current-period gross write-offs by year of origination.
January 1, 2023 using the prospective method with an option to apply a modified retrospective transition method for the recognition and measurement of TDRs which will include a cumulative effect adjustment on the balance sheet in the period of adoption. Early adoption is permitted beginning January 1, 2022, including adoption in an interim period provided guidance is applied as of the beginning of the year.
The Company does not expect the adoption of the ASU to have a significant impact on the Consolidated Financial Statements and Notes to the Consolidated Financial Statements.


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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
3. INVESTMENTS
 
Fixed Maturity Securities
 
The following tables set forth the composition of fixed maturity securities (excluding investments classified as trading), as of the dates indicated:
 
 June 30, 2022
 Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Allowance for Credit LossesFair
Value
 (in millions)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies
$25,640 $1,957 $2,303 $0 $25,294 
Obligations of U.S. states and their political subdivisions10,481 412 435 0 10,458 
Foreign government bonds72,016 6,360 3,298 6 75,072 
U.S. public corporate securities96,085 2,135 9,848 19 88,353 
U.S. private corporate securities(1)36,630 790 2,362 57 35,001 
Foreign public corporate securities22,621 583 1,604 0 21,600 
Foreign private corporate securities30,231 231 4,126 26 26,310 
Asset-backed securities(2)10,793 149 277 1 10,664 
Commercial mortgage-backed securities11,962 27 543 0 11,446 
Residential mortgage-backed securities(3)2,544 37 124 0 2,457 
Total fixed maturities, available-for-sale(1)$319,003 $12,681 $24,920 $109 $306,655 
 
 June 30, 2022
 Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Allowance for Credit LossesAmortized Cost,
Net of Allowance
 (in millions)
Fixed maturities, held-to-maturity:
Foreign government bonds$706 $155 $0 $861 $0 $706 
Foreign public corporate securities419 28 0 447 3 416 
Foreign private corporate securities7 0 0 7 0 7 
Residential mortgage-backed securities(3)151 9 0 160 0 151 
Total fixed maturities, held-to-maturity(4)$1,283 $192 $0 $1,475 $3 $1,280 
__________
(1)Excludes notes with amortized cost of $6,291 million (fair value, $6,291 million), which have been offset with the associated debt under a netting agreement.
(2)Includes credit-tranched securities collateralized by loan obligations, education loans, auto loans, credit card loans and other asset types.
(3)Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.
(4)Excludes notes with amortized cost of $4,500 million (fair value, $4,500 million), which have been offset with the associated debt under a netting agreement.
 
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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
 December 31, 2021
 Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Allowance for Credit LossesFair
Value
 (in millions)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies
$26,231 $5,958 $31 $0 $32,158 
Obligations of U.S. states and their political subdivisions10,445 1,781 8 0 12,218 
Foreign government bonds83,363 11,842 529 7 94,669 
U.S. public corporate securities98,836 13,721 390 12 112,155 
U.S. private corporate securities(2)35,019 2,583 162 58 37,382 
Foreign public corporate securities24,877 2,571 118 21 27,309 
Foreign private corporate securities28,047 1,448 442 16 29,037 
Asset-backed securities(3)11,402 137 14 0 11,525 
Commercial mortgage-backed securities12,490 631 22 0 13,099 
Residential mortgage-backed securities(4)2,749 123 14 0 2,858 
Total fixed maturities, available-for-sale(1)(2)$333,459 $40,795 $1,730 $114 $372,410 
 
 December 31, 2021
 Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Allowance for Credit LossesAmortized
Cost, Net of Allowance
 (in millions)
Fixed maturities, held-to-maturity:
Foreign government bonds$833 $221 $0 $1,054 $0 $833 
Foreign public corporate securities486 49 0 535 5 481 
Foreign private corporate securities9 0 0 9 0 9 
Residential mortgage-backed securities(4)191 14 0 205 0 191 
Total fixed maturities, held-to-maturity(5)$1,519 $284 $0 $1,803 $5 $1,514 
__________
(1)Excludes “Assets held-for-sale” with amortized cost of $13,145 million, fair value of $13,569 million, unrealized gains of $572 million, unrealized losses of $147 million and allowance for credit losses of $1 million. See Note 1 for additional information.
(2)Excludes notes with amortized cost of $5,941 million (fair value, $5,995 million), which have been offset with the associated debt under a netting agreement.
(3)Includes credit-tranched securities collateralized loan obligations, education loans, auto loans, credit cards and other asset types.
(4)Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.
(5)Excludes notes with amortized cost of $4,750 million (fair value, $5,394 million), which have been offset with the associated debt under a netting agreement.

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
 
The following tables set forth the fair value and gross unrealized losses on available-for-sale fixed maturity securities without an allowance for credit losses aggregated by investment category and length of time that individual fixed maturity securities had been in a continuous unrealized loss position, as of the dates indicated:
 
 June 30, 2022
 Less Than
Twelve Months
Twelve Months
or More
Total
 Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
 (in millions)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies$15,185 $2,294 $24 $9 $15,209 $2,303 
Obligations of U.S. states and their political subdivisions5,535 414 67 21 5,602 435 
Foreign government bonds19,147 2,153 5,299 1,145 24,446 3,298 
U.S. public corporate securities65,990 9,011 2,392 805 68,382 9,816 
U.S. private corporate securities26,290 2,068 1,516 294 27,806 2,362 
Foreign public corporate securities12,636 1,355 993 249 13,629 1,604 
Foreign private corporate securities22,307 3,571 2,091 555 24,398 4,126 
Asset-backed securities8,096 239 1,259 38 9,355 277 
Commercial mortgage-backed securities10,627 498 268 45 10,895 543 
Residential mortgage-backed securities1,521 57 387 67 1,908 124 
Total fixed maturities, available-for-sale$187,334 $21,660 $14,296 $3,228 $201,630 $24,888 


 December 31, 2021
 Less Than
Twelve Months
Twelve Months
or More
Total
 Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
 (in millions)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies$1,521 $15 $269 $16 $1,790 $31 
Obligations of U.S. states and their political subdivisions289 5 71 3 360 8 
Foreign government bonds4,534 244 6,945 282 11,479 526 
U.S. public corporate securities12,403 219 2,947 152 15,350 371 
U.S. private corporate securities4,362 84 848 78 5,210 162 
Foreign public corporate securities3,652 76 802 42 4,454 118 
Foreign private corporate securities6,350 270 1,604 169 7,954 439 
Asset-backed securities6,568 13 170 1 6,738 14 
Commercial mortgage-backed securities921 11 263 11 1,184 22 
Residential mortgage-backed securities751 13 18 1 769 14 
Total fixed maturities, available-for-sale(1)$41,351 $950 $13,937 $755 $55,288 $1,705 
__________
(1)Excludes “Assets held-for-sale” with fair value of $4,644 million and gross unrealized losses of $147 million. See Note 1 for additional information.

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
As of June 30, 2022 and December 31, 2021, the gross unrealized losses on fixed maturity available-for-sale securities without an allowance were composed of $22,624 million and $1,242 million, respectively, related to “1” highest quality or “2” high quality securities based on the National Association of Insurance Commissioners (“NAIC”) or equivalent rating and $2,264 million and $463 million, respectively, related to other than high or highest quality securities based on NAIC or equivalent rating. As of June 30, 2022, the $3,228 million of gross unrealized losses of twelve months or more were concentrated in the consumer non-cyclical, finance and utility sectors within corporate securities and foreign government securities. As of December 31, 2021, the $755 million of gross unrealized losses of twelve months or more were concentrated in consumer non-cyclical, utility and finance sectors within corporate securities.

In accordance with its policy described in Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, the Company concluded that an adjustment to earnings for credit losses related to these fixed maturity securities was not warranted at June 30, 2022. This conclusion was based on a detailed analysis of the underlying credit and cash flows on each security. Gross unrealized losses are primarily attributable to increases in interest rates, general credit spread widening, foreign currency exchange rate movements and the financial condition or near-term prospects of the issuer. As of June 30, 2022, the Company did not intend to sell these securities, and it was not more likely than not that the Company would be required to sell these securities before the anticipated recovery of the remaining amortized cost basis.

The following table sets forth the amortized cost or amortized cost, net of allowance and fair value of fixed maturities by contractual maturities, as of the date indicated: 
June 30, 2022
Available-for-SaleHeld-to-Maturity
 Amortized CostFair ValueAmortized Cost, Net of AllowanceFair Value
(in millions)
Fixed maturities:
Due in one year or less$10,356 $10,578 $0 $0 
Due after one year through five years48,221 48,117 417 447 
Due after five years through ten years62,288 60,950 24 26 
Due after ten years(1)172,839 162,443 688 842 
Asset-backed securities10,793 10,664 0 0 
Commercial mortgage-backed securities11,962 11,446 0 0 
Residential mortgage-backed securities2,544 2,457 151 160 
Total$319,003 $306,655 $1,280 $1,475 
__________
(1)Excludes available-for-sale notes with amortized cost of $6,291 million (fair value, $6,291 million) and held-to-maturity notes with amortized cost of $4,500 million (fair value, $4,500 million), which have been offset with the associated debt under a netting agreement.

Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Asset-backed, commercial mortgage-backed and residential mortgage-backed securities are shown separately in the table above, as they do not have a single maturity date.
 
The following table sets forth the sources of fixed maturity proceeds and related investment gains (losses), as well as losses on write-downs and the allowance for credit losses of fixed maturities, for the periods indicated:

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
 (in millions)
Fixed maturities, available-for-sale:
Proceeds from sales(1)$9,995 $5,078 $19,078 $19,768 
Proceeds from maturities/prepayments4,301 8,002 9,606 14,896 
Gross investment gains from sales and maturities374 361 615 1,963 
Gross investment losses from sales and maturities(1,017)(99)(1,587)(489)
Write-downs recognized in earnings(2)(86)0 (92)0 
(Addition to) release of allowance for credit losses82 51 5 53 
Fixed maturities, held-to-maturity:
Proceeds from maturities/prepayments(3)$8 $132 $17 $144 
(Addition to) release of allowance for credit losses1 0 2 2 
__________ 
(1)Excludes activity from non-cash related proceeds due to the timing of trade settlements of $(48) million and $249 million for the six months ended June 30, 2022 and 2021, respectively.
(2)Amounts represent write-downs on credit adverse securities and securities actively marketed for sale.
(3)Excludes activity from non-cash related proceeds due to the timing of trade settlements of less than $1 million and $0 million for the six months ended June 30, 2022 and 2021, respectively.


The following tables set forth the activity in the allowance for credit losses for fixed maturity securities, as of the dates indicated: 

Three Months Ended June 30, 2022
U.S. Treasury Securities and Obligations of U.S. StatesForeign Government BondsU.S. and Foreign Corporate SecuritiesAsset-Backed SecuritiesCommercial Mortgage-Backed SecuritiesResidential Mortgage-Backed SecuritiesTotal
(in millions)
Fixed maturities, available-for-sale:
Balance, beginning of period$0 $12 $180 $0 $0 $0 $192 
Additions to allowance for credit losses not previously recorded
0 1 11 1 0 0 13 
Reductions for securities sold during the period
0 0 (25)0 0 0 (25)
Reductions for securities with intent to sell
0 (9)(67)0 0 0 (76)
Additions (reductions) on securities with previous allowance0 2 4 0 0 0 6 
Reclassified to / (from) “Assets held-for sale”(1)0 0 (1)0 0 0 (1)
Balance, end of period$0 $6 $102 $1 $0 $0 $109 
_________
(1)See Note 1 for additional information.
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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
Three Months Ended June 30, 2021
U.S. Treasury Securities and Obligations of U.S. StatesForeign Government BondsU.S. and Foreign Corporate SecuritiesAsset-Backed SecuritiesCommercial Mortgage-Backed SecuritiesResidential Mortgage-Backed SecuritiesTotal
(in millions)
Fixed maturities, available-for-sale:
Balance, beginning of period$0 $0 $122 $0 $9 $0 $131 
Additions to allowance for credit losses not previously recorded
0 0 9 0 0 0 9 
Reductions for securities sold during the period
0 0 (4)0 (9)0 (13)
Additions (reductions) on securities with previous allowance0 0 (47)0 0 0 (47)
Balance, end of period$0 $0 $80 $0 $0 $0 $80 


Six Months Ended June 30, 2022
U.S. Treasury Securities and Obligations of U.S. StatesForeign Government BondsU.S. and Foreign Corporate SecuritiesAsset-Backed SecuritiesCommercial Mortgage-Backed SecuritiesResidential Mortgage-Backed SecuritiesTotal
(in millions)
Fixed maturities, available-for-sale:
Balance, beginning of period$0 $7 $107 $0 $0 $0 $114 
Additions to allowance for credit losses not previously recorded
0 11 73 1 0 0 85 
Reductions for securities sold during the period
0 (2)(53)0 0 0 (55)
Reductions for securities with intent to sell0 (13)(67)0 0 0 (80)
Additions (reductions) on securities with previous allowance0 3 42 0 0 0 45 
Balance, end of period$0 $6 $102 $1 $0 $0 $109 
20

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
Six Months Ended June 30, 2021
U.S. Treasury Securities and Obligations of U.S. StatesForeign Government BondsU.S. and Foreign Corporate SecuritiesAsset-Backed SecuritiesCommercial Mortgage-Backed SecuritiesResidential Mortgage-Backed SecuritiesTotal
(in millions)
Fixed maturities, available-for-sale:
Balance, beginning of period$0 $0 $123 $0 $10 $0 $133 
Additions to allowance for credit losses not previously recorded
0 0 40 0 0 0 40 
Reductions for securities sold during the period
0 0 (30)0 (9)0 (39)
Additions (reductions) on securities with previous allowance0 0 (53)0 (1)0 (54)
Balance, end of period$0 $0 $80 $0 $0 $0 $80 

Three Months Ended June 30, 2022
U.S. Treasury Securities and Obligations of U.S. StatesForeign Government BondsU.S. and Foreign Corporate SecuritiesAsset-Backed SecuritiesCommercial Mortgage-Backed SecuritiesResidential Mortgage-Backed SecuritiesTotal
(in millions)
Fixed maturities, held-to-maturity:
Balance, beginning of period$0 $0 $4 $0 $0 $0 $4 
Current period provision for expected losses0 0 (1)0 0 0 (1)
Change in foreign exchange0 0 0 0 0 0 0 
Balance, end of period$0 $0 $3 $0 $0 $0 $3 

Three Months Ended June 30, 2021
U.S. Treasury Securities and Obligations of U.S. StatesForeign Government BondsU.S. and Foreign Corporate SecuritiesAsset-Backed SecuritiesCommercial Mortgage-Backed SecuritiesResidential Mortgage-Backed SecuritiesTotal
(in millions)
Fixed maturities, held-to-maturity:
Balance, beginning of period$0 $0 $7 $0 $0 $0 $7 
Current period provision for expected losses0 0 0 0 0 0 0 
Balance, end of period$0 $0 $7 $0 $0 $0 $7 

21

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
Six Months Ended June 30, 2022
U.S. Treasury Securities and Obligations of U.S. StatesForeign Government BondsU.S. and Foreign Corporate SecuritiesAsset-Backed SecuritiesCommercial Mortgage-Backed SecuritiesResidential Mortgage-Backed SecuritiesTotal
(in millions)
Fixed maturities, held-to-maturity:
Balance, beginning of period$0 $0 $5 $0 $0 $0 $5 
Current period provision for expected losses0 0 (1)0 0 0 (1)
Change in foreign exchange0 0 (1)0 0 0 (1)
Balance, end of period$0 $0 $3 $0 $0 $0 $3 

Six Months Ended June 30, 2021
U.S. Treasury Securities and Obligations of U.S. StatesForeign Government BondsU.S. and Foreign Corporate SecuritiesAsset-Backed SecuritiesCommercial Mortgage-Backed SecuritiesResidential Mortgage-Backed SecuritiesTotal
(in millions)
Fixed maturities, held-to-maturity:
Balance, beginning of period$0 $0 $9 $0 $0 $0 $9 
Current-period allowance for expected credit losses
0 0 (2)0 0 0 (2)
Balance, end of period$0 $0 $7 $0 $0 $0 $7 

For additional information about the Company’s methodology for developing our allowance and expected losses, see Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

For the three months ended June 30, 2022, the net decrease in the allowance for credit losses on available-for-sale securities was primarily related to net reductions in the communications, foreign agencies and utility sectors within corporate securities, partially offset by a net addition within the capital goods sector. For the three months ended June 30, 2021, the net decrease in the allowance for credit losses on available-for-sale securities was primarily related to the improving credit environment within the consumer cyclical, energy and communication sectors within corporate securities.

For the six months ended June 30, 2022, the net decrease in the allowance for credit losses on available-for-sale securities was primarily related to net reductions in the communications and transportation sectors within corporate securities, partially offset by net additions in the capital goods and utility sectors. For the six months ended June 30, 2021, the net decrease in the allowance for credit losses on available-for-sale securities was primarily related to the improving credit environment within the energy and consumer cyclical sectors within corporate securities.

The Company did not have any fixed maturity securities purchased with credit deterioration, as of June 30, 2022 or December 31, 2021.

22

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
Assets Supporting Experience-Rated Contractholder Liabilities
 
The following table sets forth the composition of “Assets supporting experience-rated contractholder liabilities,” as of the dates indicated:
 June 30, 2022December 31, 2021
Assets Held-for-Sale(1)
 Amortized
Cost or Cost
Fair
Value
Amortized
Cost or Cost
Fair
Value
Amortized
Cost or Cost
Fair
Value
 (in millions)
Short-term investments and cash equivalents$0 $0 $30 $30 $786 $786 
Fixed maturities:
Corporate securities90 90 101 103 12,112 12,463 
Commercial mortgage-backed securities0 0 0 0 1,799 1,830 
Residential mortgage-backed securities(2)0 0 0 0 658 683 
Asset-backed securities(3)0 0 0 0 2,079 2,093 
Foreign government bonds677 658 761 761 240 237 
U.S. government authorities and agencies and obligations of U.S. states167 187 182 193 344 400 
Total fixed maturities(4)934 935 1,044 1,057 17,232 17,706 
Equity securities1,573 1,850 1,787 2,271 328 326 
Total assets supporting experience-rated contractholder liabilities(5)$2,507 $2,785 $2,861 $3,358 $18,346 $18,818 
__________ 
(1)See Note 1 for additional information.
(2)Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.
(3)Includes collateralized loan obligations, auto loans, education loans, home equity and other asset types. Collateralized loan obligations at fair value, was $1,607 million, including “Assets held-for-sale” as of December 31, 2021, all of which were rated AA or higher.
(4)As a percentage of amortized cost, 98% of the portfolio was considered high or highest quality based on NAIC or equivalent ratings, as of June 30, 2022. As a percentage of amortized cost, 97% of the portfolio including “Asset held-for-sale” was considered high or highest quality based on NAIC or equivalent ratings, as of December 31, 2021.
(5)As a percentage of amortized cost, all of the portfolio consisted of public securities, as of June 30, 2022. As a percentage of amortized cost, 95% of the portfolio including “Assets held-for-sale” consisted of public securities, as of December 31, 2021.

The net change in unrealized gains (losses) from assets supporting experience-rated contractholder liabilities still held at period end, recorded within “Other income (loss),” was $281 million and $165 million during the three months ended June 30, 2022 and 2021, respectively, and $(691) million and $(294) million during the six months ended June 30, 2022 and 2021, respectively.

Equity Securities
 
The net change in unrealized gains (losses) from equity securities still held at period end, recorded within “Other income (loss),” was $(601) million and $86 million, during the three months ended June 30, 2022 and 2021, respectively, and $(858) million and $438 million during the six months ended June 30, 2022 and 2021, respectively.

Concentrations of Financial Instruments
 
The Company monitors its concentrations of financial instruments and mitigates credit risk by maintaining a diversified investment portfolio which limits exposure to any single issuer.
 
As of the dates indicated, the Company’s exposure to concentrations of credit risk of single issuers greater than 10% of the Company’s equity included securities of the U.S. government and certain U.S. government agencies and securities guaranteed by the U.S. government, as well as the securities disclosed below:
 
23

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
 June 30, 2022December 31, 2021
 Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
 (in millions)
Investments in Japanese government and government agency securities:
Fixed maturities, available-for-sale$62,326 $65,845 $73,681 $83,382 
Fixed maturities, held-to-maturity687 838 812 1,026 
Fixed maturities, trading20 19 23 23 
Assets supporting experience-rated contractholder liabilities590 574 983 977 
Total$63,623 $67,276 $75,499 $85,408 

Commercial Mortgage and Other Loans
 
The following table sets forth the composition of “Commercial mortgage and other loans,” as of the dates indicated:
 
 June 30, 2022December 31, 2021
 Amount
(in millions)
% of
Total
Amount
(in millions)
% of
Total
Commercial mortgage and agricultural property loans by property type:
Office$9,654 17.1 %$10,225 17.6 %
Retail6,161 10.9 6,779 11.7 
Apartments/Multi-Family15,683 27.9 16,742 28.8 
Industrial13,039 23.1 13,009 22.4 
Hospitality1,912 3.4 1,876 3.2 
Other3,898 6.9 3,936 6.8 
Total commercial mortgage loans50,347 89.3 52,567 90.5 
Agricultural property loans6,048 10.7 5,520 9.5 
Total commercial mortgage and agricultural property loans56,395 100.0 %58,087 100.0 %
Allowance for credit losses(164)(115)
Total net commercial mortgage and agricultural property loans56,231 57,972 
Other loans:
Uncollateralized loans485 561 
Residential property loans49 67 
Other collateralized loans107 70 
Total other loans641 698 
Allowance for credit losses(32)(4)
Total net other loans609 694 
Total net commercial mortgage and other loans(1)(2)$56,840 $58,666 
__________ 
(1)Excludes “Assets held-for-sale” of $6,565 million net of allowance for credit losses of $15 million as of December 31, 2021. See Note 1 for additional information.
(2)Includes loans which are carried at fair value under the fair value option and are collateralized primarily by apartment complexes. As of June 30, 2022 and December 31, 2021, the net carrying value of these loans were $303 million and $1,263 million, respectively.

As of June 30, 2022, the commercial mortgage and agricultural property loans were secured by properties geographically dispersed throughout the United States with the largest concentrations in California (30%), Texas (8%) and New York (6%) and included loans secured by properties in Europe (6%), Asia (1%) and Australia (1%).

24

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
The following tables set forth the activity in the allowance for credit losses for commercial mortgage and other loans, as of the dates indicated:
Three Months Ended June 30, 2022
 Commercial
Mortgage
Loans
Agricultural
Property
Loans
Residential
Property
Loans
Other
Collateralized
Loans
Uncollateralized
Loans
Total
(in millions)
Allowance, beginning of period$113 $4 $0 $0 $4 $121 
Addition to (release of) allowance for expected losses44 4 0 0 28 76 
Other(1)0 0 0 0 (1)
Allowance, end of period$156 $8 $0 $0 $32 $196 

Three Months Ended June 30, 2021
 Commercial
Mortgage
Loans
Agricultural
Property
Loans
Residential
Property
Loans
Other
Collateralized
Loans
Uncollateralized
Loans
Total
(in millions)
Allowance, beginning of period$209 $8 $0 $2 $5 $224 
Addition to (release of) allowance for expected losses(49)(2)0 0 (1)(52)
Allowance, end of period$160 $6 $0 $2 $4 $172 

Six Months Ended June 30, 2022
 Commercial
Mortgage
Loans
Agricultural
Property
Loans
Residential
Property
Loans
Other
Collateralized
Loans
Uncollateralized
Loans
Total
(in millions)
Allowance, beginning of period$111 $4 $0 $0 $4 $119 
Addition to (release of) allowance for expected losses40 4 0 0 28 72 
Reclassified (to) from “Assets held-for sale”(1) 6 0 0 0 0 6 
Other(1)0 0 0 0 (1)
Allowance, end of period$156 $8 $0 $0 $32 $196 
_________
(1)See Note 1 for additional information.

Six Months Ended June 30, 2021
 Commercial
Mortgage
Loans
Agricultural
Property
Loans
Residential
Property
Loans
Other
Collateralized
Loans
Uncollateralized
Loans
Total
(in millions)
Allowance, beginning of period$218 $9 $0 $3 $5 $235 
Addition to (release of) allowance for expected losses(58)(3)0 0 (1)(62)
Other0 0 0 (1)0 (1)
Allowance, end of period$160 $6 $0 $2 $4 $172 

For additional information about the Company’s methodology for developing our allowance and expected losses, see Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
25

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

For the three months ended June 30, 2022, the net addition to the allowance for credit losses on commercial mortgage and other loans was due to increases in loan-specific reserves as well as increases to reserves to reflect current market conditions. For the three months ended June 30, 2021, the net decrease in the allowance for credit losses on commercial mortgage and other loans was primarily related to the improving credit environment.

For the six months ended June 30, 2022, the net addition to the allowance for credit losses on commercial mortgage and other loans was due to increases in loan-specific reserves as well as increases to reserves to reflect current market conditions. For the six months ended June 30, 2021, the net decrease in the allowance for credit losses on commercial mortgage and other loans was primarily related to the improving credit environment.

The following tables set forth key credit quality indicators based upon the recorded investment gross of allowance for credit losses, as of the dates indicated:
June 30, 2022
Amortized Cost by Origination Year
20222021202020192018PriorRevolving LoansTotal
(in millions)
Commercial Mortgage Loans
Loan-to-Value Ratio:
0%-59.99%$441 $1,180 $634 $2,285 $3,085 $15,741 $0 $23,366 
60%-69.99%893 3,431 1,782 3,753 3,621 4,596 0 18,076 
70%-79.99%881 1,857 1,216 1,153 583 2,467 0 8,157 
80% or greater4 25 39 7 0 673 0 748 
Total$2,219 $6,493 $3,671 $7,198 $7,289 $23,477 $0 $50,347 
Debt Service Coverage Ratio:
Greater or Equal to 1.2x$2,043 $6,278 $3,379 $6,094 $6,772 $19,271 $0 $43,837 
1.0 - 1.2x176 215 112 686 420 1,893 0 3,502 
Less than 1.0x0 0 180 418 97 2,313 0 3,008 
Total$2,219 $6,493 $3,671 $7,198 $7,289 $23,477 $0 $50,347 
Agricultural Property Loans
Loan-to-Value Ratio:
0%-59.99%$659 $2,003 $864 $486 $321 $1,454 $79 $5,866 
60%-69.99%19 85 8 33 37 0 0 182 
70%-79.99%0 0 0 0 0 0 0 0 
80% or greater0 0 0 0 0 0 0 0 
Total$678 $2,088 $872 $519 $358 $1,454 $79 $6,048 
Debt Service Coverage Ratio:
Greater or Equal to 1.2x$670 $2,044 $847 $508 $351 $1,330 $79 $5,829 
1.0 - 1.2x0 44 25 10 1 67 0 147 
Less than 1.0x8 0 0 1 6 57 0 72 
Total$678 $2,088 $872 $519 $358 $1,454 $79 $6,048 
26

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

December 31, 2021
Amortized Cost by Origination Year
20212020201920182017PriorRevolving LoansTotal(1)
(in millions)
Commercial Mortgage Loans
Loan-to-Value Ratio:
0%-59.99%$1,287 $467 $2,459 $3,211 $3,072 $14,011 $0 $24,507 
60%-69.99%3,101 1,941 4,124 3,631 1,356 4,161 0 18,314 
70%-79.99%2,497 1,207 1,327 1,059 631 2,108 0 8,829 
80% or greater184 39 7 62 50 575 0 917 
Total$7,069 $3,654 $7,917 $7,963 $5,109 $20,855 $0 $52,567 
Debt Service Coverage Ratio:
Greater or Equal to 1.2x$6,803 $3,356 $6,828 $7,384 $4,445 $16,864 $0 $45,680 
1.0 - 1.2x266 154 662 478 234 2,069 0 3,863 
Less than 1.0x0 144 427 101 430 1,922 0 3,024 
Total$7,069 $3,654 $7,917 $7,963 $5,109 $20,855 $0 $52,567 
Agricultural Property Loans
Loan-to-Value Ratio:
0%-59.99%$1,958 $887 $494 $334 $370 $1,226 $80 $5,349 
60%-69.99%92 5 29 37 0 0 0 163 
70%-79.99%0 0 0 0 0 0 0 0 
80% or greater0 3 5 0 0 0 0 8 
Total$2,050 $895 $528 $371 $370 $1,226 $80 $5,520 
Debt Service Coverage Ratio:
Greater or Equal to 1.2x$2,007 $870 $517 $364 $312 $1,121 $80 $5,271 
1.0 - 1.2x43 25 10 1 58 41 0 178 
Less than 1.0x0 0 1 6 0 64 0 71 
Total$2,050 $895 $528 $371 $370 $1,226 $80 $5,520 
__________
(1)Excludes “Assets held-for-sale” of $6,580 million. See Note 1 for additional information.

For additional information about the Company’s commercial mortgage and other loans credit quality monitoring process, see Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
 
The following tables set forth an aging of past due commercial mortgage and other loans based upon the recorded investment gross of allowance for credit losses, as well as the amount of commercial mortgage and other loans on non-accrual status, as of the dates indicated:
 
27

Table of Contents
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
 June 30, 2022
 Current30-59 Days
Past Due
60-89 Days
Past Due
90 Days or More Past Due(1)Total Past
Due
Total
Loans
Non-Accrual
Status(2)
 (in millions)
Commercial mortgage loans$50,347 $0 $0 $0 $0 $50,347 $2 
Agricultural property loans6,042 0 0 6 6 6,048 20 
Residential property loans48 1 0 0 1 49 0 
Other collateralized loans107 0 0 0 0 107 0 
Uncollateralized loans485 0 0 0 0 485 0 
Total$57,029 $1 $0 $6 $7 $57,036 $22 
__________
(1)As of June 30, 2022, there were no loans in this category accruing interest.
(2)For additional information regarding the Company’s policies for accruing interest on loans, see Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.


 December 31, 2021
 Current30-59 Days
Past Due
60-89 Days
Past Due
90 Days or More Past Due(1)Total Past
Due
Total
Loans
Non-Accrual
Status(2)
 (in millions)
Commercial mortgage loans$52,565 $0 $0 $2 $2 $52,567 $2 
Agricultural property loans5,520 0 0 0 0 5,520 19 
Residential property loans66 0 0 1 1 67 1 
Other collateralized loans70 0 0 0 0 70 0 
Uncollateralized loans561 0 0 0 0 561 0 
Total(3)$58,782 $0 $0 $3 $3 $58,785 $22 
__________
(1)As of December 31, 2021, there were no loans in this category accruing interest.
(2)For additional information regarding the Company’s policies for accruing interest on loans, see Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
(3)Excludes “Assets held-for-sale” of $6,580 million. See Note 1 for additional information.

Loans on non-accrual status recognized interest of less than $1 million for both the three months ended June 30, 2022 and 2021, and less than $1 million and $2 million for the six months ended June 30, 2022 and 2021, respectively. Loans on non-accrual status that did not have a related allowance for credit losses were $20 million and $15 million as of June 30, 2022 and December 31, 2021, respectively.

The Company did not have any significant losses on commercial mortgage and other loans purchased with credit deterioration as of both June 30, 2022 and December 31, 2021.
28

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Other Invested Assets
 
The following table sets forth the composition of “Other invested assets,” as of the dates indicated:
June 30, 2022December 31, 2021
 (in millions)
LPs/LLCs:
Equity method:
Private equity$7,187 $6,509 
Hedge funds3,031 2,797 
Real estate-related2,626 2,370 
Subtotal equity method12,844 11,676 
Fair value:
Private equity1,677 1,852 
Hedge funds1,950 2,119 
Real estate-related300 319 
Subtotal fair value3,927 4,290 
Total LPs/LLCs16,771 15,966 
Real estate held through direct ownership(1)1,594 1,789 
Derivative instruments2,327 3,280 
Other(2)618 798 
Total other invested assets(3)$21,310 $21,833 
_________ 
(1)As of June 30, 2022 and December 31, 2021, real estate held through direct ownership had mortgage debt of $234 million and $274 million, respectively.
(2)Primarily includes strategic investments made by investment management operations, leveraged leases and member and activity stock held in the Federal Home Loan Bank of New York. For additional information regarding the Company’s holdings in the Federal Home Loan Bank of New York, see Note 17 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
(3)Excludes “Assets held-for-sale” of $104 million as of December 31, 2021. See Note 1 for additional information.

Accrued Investment Income

The following table sets forth the composition of “Accrued investment income,” as of the dates indicated:
 June 30, 2022December 31, 2021
 (in millions)
Fixed maturities$2,329 $2,398 
Equity securities5 5 
Commercial mortgage and other loans185 175 
Policy loans246 253 
Other invested assets21 22 
Short-term investments and cash equivalents12 2 
Total accrued investment income(1)$2,798 $2,855 
__________
(1)Excludes “Assets held-for-sale” of $221 million as of December 31, 2021. See Note 1 for additional information.

Write-downs on accrued investment income were less than $1 million for both the three and six months ended June 30, 2022 and 2021, respectively.
29

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

Net Investment Income
 
The following table sets forth “Net investment income” by investment type, for the periods indicated: 
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
 (in millions)
Fixed maturities, available-for-sale(1)$2,861 $3,006 $5,830 $6,005 
Fixed maturities, held-to-maturity(1)54 55108 113 
Fixed maturities, trading53 37115 61 
Assets supporting experience-rated contractholder liabilities9 167144 326 
Equity securities50 5876 81 
Commercial mortgage and other loans525 6441,113 1,261 
Policy loans126 126251 271 
Other invested assets326 617881 1,133 
Short-term investments and cash equivalents58 2075 30 
Gross investment income4,062 4,730 8,593 9,281 
Less: investment expenses(124)(178)(297)(347)
Net investment income$3,938 $4,552 $8,296 $8,934 
__________ 
(1)Includes income on credit-linked notes which are reported on the same financial statement line items as related surplus notes, as conditions are met for right to offset.
Realized Investment Gains (Losses), Net
 
The following table sets forth “Realized investment gains (losses), net” by investment type, for the periods indicated:
 
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
 (in millions)
Fixed maturities(1)$(646)$313 $(1,057)$1,529 
Commercial mortgage and other loans(81)61 (66)91 
Investment real estate84 12 90 64 
LPs/LLCs6 17 (6)17 
Derivatives(516)239 (426)1,014 
Other6 (7)2 (1)
Realized investment gains (losses), net$(1,147)$635 $(1,463)$2,714 
__________ 
(1)Includes fixed maturity securities classified as available-for-sale and held-to-maturity and excludes fixed maturity securities classified as trading.
 









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Table of Contents
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
Net Unrealized Gains (Losses) on Investments within AOCI

The following table sets forth net unrealized gains (losses) on investments, as of the dates indicated:
June 30, 2022December 31, 2021
 (in millions)
Fixed maturity securities, available-for-sale with an allowance(1)$(12)$23 
Fixed maturity securities, available-for-sale without an allowance(1)(12,227)39,467 
Derivatives designated as cash flow hedges(2)2,446 1,019 
Derivatives designated as fair value hedges(2)27 (35)
Other investments(3)(15)(7)
Net unrealized gains (losses) on investments$(9,781)$40,467 
__________ 
(1)Includes net unrealized gains (losses) of $425 million on “Assets held-for-sale” as of December 31, 2021.
(2)For additional information on cash flow and fair value hedges, see Note 5.
(3)As of June 30, 2022 there were no net unrealized losses on held-to-maturity securities that were previously transferred from available-for-sale. Includes net unrealized gains on certain joint ventures that are strategic in nature and are included in “Other assets.”

Repurchase Agreements and Securities Lending

In the normal course of business, the Company sells securities under agreements to repurchase and enters into securities lending transactions. The following table sets forth the composition of “Securities sold under agreements to repurchase,” as of the dates indicated:
June 30, 2022December 31, 2021
Remaining Contractual Maturities of the AgreementsRemaining Contractual Maturities of the Agreements
 Overnight & ContinuousUp to 30 Days30 to 90 DaysTotal  Overnight & ContinuousUp to 30 Days30 to 90 DaysTotal
(in millions)
U.S. Treasury securities and obligations of U.S. government authorities and agencies$6,917 $655 $250 $7,822 $9,044 $0 $438 $9,482 
Commercial mortgage-backed securities69 0 0 69 486 0 0 486 
Residential mortgage-backed securities115 0 0 115 217 0 0 217 
Total securities sold under agreements to repurchase$7,101 $655 $250 $8,006 $9,747 $0 $438 $10,185 
.
The following table sets forth the composition of “Cash collateral for loaned securities” which represents the liability to return cash collateral received for the following types of securities loaned, as of the dates indicated:
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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

June 30, 2022December 31, 2021
Remaining Contractual Maturities of the AgreementsRemaining Contractual Maturities of the Agreements
 Overnight & ContinuousUp to 30 DaysTotal  Overnight & ContinuousUp to 30 DaysTotal
(in millions)
U.S. Treasury securities and obligations of U.S.
government authorities and agencies
$1 $0 $1 $1 $0 $1 
Obligations of U.S. states and their political
subdivisions
75 0 75 84 0 84 
Foreign government bonds328 0 328 205 0 205 
U.S. public corporate securities4,191 0 4,191 2,834 0 2,834 
Foreign public corporate securities890 0 890 643 0 643 
Equity securities256 0 256 484 0 484 
Total cash collateral for loaned securities(1)$5,741 $0 $5,741 $4,251 $0 $4,251 
__________ 
(1)The Company did not have any agreements with remaining contractual maturities greater than thirty days, as of the dates indicated.

4. VARIABLE INTEREST ENTITIES
 
In the normal course of its activities, the Company enters into relationships with various special-purpose entities and other entities that are deemed to be variable interest entities (“VIEs”). For additional information, see Note 4 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
 
Consolidated Variable Interest Entities
 
The table below reflects the carrying amount and balance sheet caption in which the assets and liabilities of consolidated VIEs are reported. The liabilities primarily comprise obligations under debt instruments issued by the VIEs. The creditors of these VIEs do not have recourse to the Company in excess of the assets contained within the VIEs.
 Consolidated VIEs for which the
Company is the Investment
Manager(1)
Other Consolidated VIEs(1)
 June 30,
2022
December 31,
2021
June 30,
2022
December 31,
2021
 (in millions)
Fixed maturities, available-for-sale$177 $200 $218 $262 
Fixed maturities, held-to-maturity7 9 670 790 
Fixed maturities, trading168 178 0 0 
Equity securities119 79 0 0 
Commercial mortgage and other loans838 915 0 0 
Other invested assets2,966 2,846 121 138 
Cash and cash equivalents106 128 0 0 
Accrued investment income1 1 3 3 
Other assets326 499 707 785 
Total assets of consolidated VIEs$4,708 $4,855 $1,719 $1,978 
Other liabilities$368 $505 $0 $2 
Notes issued by consolidated VIEs(2)232 274 0 0 
Total liabilities of consolidated VIEs$600 $779 $0 $2 
 __________
(1)Total assets of consolidated VIEs reflect $2,907 million and $2,885 million as of June 30, 2022 and December 31, 2021, respectively, related to VIEs whose beneficial interests are wholly-owned by consolidated subsidiaries.
(2)Recourse is limited to the assets of the respective VIE and does not extend to the general credit of the Company. As of June 30, 2022, the maturity of this obligation was within 3 years.
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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
 
Unconsolidated Variable Interest Entities
 
The Company has determined that it is not the primary beneficiary of certain VIEs for which it is the investment manager. The Company’s maximum exposure to loss resulting from its relationship with unconsolidated VIEs for which it is the investment manager is limited to its investment in the VIEs, which was $906 million and $997 million as of June 30, 2022 and December 31, 2021, respectively. These investments are reflected in “Fixed maturities, available-for-sale,” “Fixed maturities, trading,” “Equity securities” and “Other invested assets.” There are no liabilities associated with these unconsolidated VIEs on the Company’s Unaudited Interim Consolidated Statements of Financial Position.
 
In the normal course of its activities, the Company will invest in limited partnerships and limited liability companies (“LPs/LLCs”), which include hedge funds, private equity funds and real estate-related funds and may or may not be VIEs. The Company’s maximum exposure to loss on these investments, both VIEs and non-VIEs, is limited to the amount of its investment. The Company classifies these investments as “Other invested assets” and its maximum exposure to loss associated with these entities was $16,771 million as of June 30, 2022, and $15,966 million as of December 31, 2021, excluding “Assets held-for-sale.”
 
In addition, in the normal course of its activities, the Company will invest in structured investments including VIEs for which it is not the investment manager. These structured investments typically invest in fixed income investments and are managed by third-parties and include asset-backed securities, commercial mortgage-backed securities and residential mortgage-backed securities. The Company’s maximum exposure to loss on these structured investments, both VIEs and non-VIEs, is limited to the amount of its investment. See Note 3 for details regarding the carrying amounts and classification of these assets. The Company has not provided material financial or other support that was not contractually required to these structures. The Company has determined that it is not the primary beneficiary of these structures due to the fact that it does not control these entities.

5. DERIVATIVES AND HEDGING
 
Types of Derivative and Hedging Instruments

The Company utilizes various derivatives and hedging instruments to manage its risk. Commonly used derivative and non-derivative hedging instruments include, but are not necessarily limited to:
Interest rate contracts: futures, swaps, forwards, options, caps and floors
Equity contracts: futures, options and total return swaps
Foreign exchange contracts: futures, options, forwards, swaps, and foreign currency debt instruments
Credit contracts: single and index reference credit default swaps

Other types of financial contracts that the Company accounts for as derivatives are:
To-be-announced (“TBA”) forward contracts, loan commitments, embedded derivatives and synthetic guaranteed investment contracts (“GICs”).

For detailed information on these contracts and the related strategies, see Note 5 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Primary Risks Managed by Derivatives
 
The table below provides a summary of the gross notional amount and fair value of derivatives contracts by the primary underlying risks, excluding embedded derivatives and associated reinsurance recoverables. Many derivative instruments contain multiple underlying risks. The fair value amounts below represent the value of derivative contracts prior to taking into account of the netting effects of master netting agreements and cash collateral. This netting impact results in total derivative assets of $2,318 million and $3,266 million as of June 30, 2022 and December 31, 2021, respectively, and total derivative liabilities of $1,857 million and $2,278 million as of June 30, 2022 and December 31, 2021, respectively, reflected in the Unaudited Interim Consolidated Statements of Financial Position.

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
Primary Underlying Risk /Instrument TypeJune 30, 2022December 31, 2021
 Fair Value Fair Value
Gross NotionalAssetsLiabilitiesGross NotionalAssetsLiabilities
 (in millions)
Derivatives Designated as Hedge Accounting Instruments:
Interest Rate
Interest Rate Swaps$3,746 $187 $(106)$3,591 $805 $(69)
Interest Rate Forwards497 0 (58)248 15 (2)
Foreign Currency
Foreign Currency Forwards5,145 121 (191)4,789 62 (107)
Currency/Interest Rate
Foreign Currency Swaps23,870 3,206 (341)21,272 1,151 (193)
Total Derivatives Designated as Hedge Accounting Instruments$33,258 $3,514 $(696)$29,900 $2,033 $(371)
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate
Interest Rate Swaps$202,568 $7,800 $(16,220)$196,124 $10,515 $(14,430)
Interest Rate Futures15,032 103 (67)17,429 76 (9)
Interest Rate Options13,648 554 (508)15,353 710 (265)
Interest Rate Forwards3,745 32 (40)4,709 41 (11)
Foreign Currency
Foreign Currency Forwards33,187 2,114 (2,438)28,235 1,046 (1,209)
Foreign Currency Options0 0 0 0 0 0 
Currency/Interest Rate
Foreign Currency Swaps12,817 1,414 (219)12,683 751 (216)
Credit
Credit Default Swaps5,462 6 (57)3,489 128 (1)
Equity
Equity Futures3,793 2 (27)6,178 1 (10)
Equity Options60,425 1,546 (1,960)60,057 2,065 (2,640)
Total Return Swaps10,825 846 (27)13,850 49 (430)
Other
Other(1)1,250 0 0 1,255 0 0 
Synthetic GICs84,082 1 (1)81,984 1 0 
Total Derivatives Not Qualifying as Hedge Accounting Instruments$446,834 $14,418 $(21,564)$441,346 $15,383 $(19,221)
Total Derivatives(2)(3)(4)$480,092 $17,932 $(22,260)$471,246 $17,416 $(19,592)
__________
(1)“Other” primarily includes derivative contracts used to improve the balance of the Company’s tail longevity and mortality risk. Under these contracts, the Company’s gains (losses) are capped at the notional amount.
(2)Excludes embedded derivatives and associated reinsurance recoverables which contain multiple underlying risks. The fair value of these embedded derivatives was a net liability of $8,781 million and $10,245 million as of June 30, 2022 and December 31, 2021, respectively, primarily included in “Future policy benefits” and "Policyholder account balances."
(3)Recorded in “Other invested assets” and “Other liabilities” on the Unaudited Interim Consolidated Statements of Financial Position.
(4)Excludes “Assets held-for-sale” with fair value of $1,643 million as of December 31, 2021 and “Liabilities held-for-sale” with fair value of $1,503 million as of December 31, 2021 with an outstanding gross notional amount of $41,179 million as of December 31, 2021. See Note 1 for additional information.

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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
As of June 30, 2022, the following amounts were recorded on the Unaudited Interim Consolidated Statements of Financial Position related to the carrying amount of the hedged assets (liabilities) and cumulative basis adjustments included in the carrying amount for fair value hedges.
June 30, 2022December 31, 2021
Balance Sheet Line Item in which Hedged Item is RecordedCarrying Amount of the Hedged Assets (Liabilities)Cumulative Amount of
Fair Value Hedging Adjustment Included in the
Carrying Amount of the Hedged
Assets (Liabilities)(1)
Carrying Amount of the Hedged Assets (Liabilities)Cumulative Amount of
Fair Value Hedging Adjustment Included in the
Carrying Amount of the Hedged
Assets (Liabilities)(1)
(in millions)
Fixed maturities, available-for-sale, at fair value$526 $63 $641 $63 
Commercial mortgage and other loans$0 $0 $17 $1 
Policyholders’ account balances$(1,297)$115 $(1,552)$(170)
Future policy benefits$(2,488)$259 $(3,001)$(279)
__________
(1)There were no material fair value hedging adjustments for hedged assets and liabilities for which hedge accounting has been discontinued.

Most of the Company’s derivatives do not qualify for hedge accounting for various reasons. For example: (i) derivatives that economically hedge embedded derivatives do not qualify for hedge accounting because changes in the fair value of the embedded derivatives are already recorded in net income; (ii) derivatives that are utilized as macro hedges of the Company’s exposure to various risks typically do not qualify for hedge accounting because they do not meet the criteria required under portfolio hedge accounting rules; and (iii) synthetic GICs, which are product standalone derivatives, do not qualify as hedging instruments under hedge accounting rules.

Offsetting Assets and Liabilities
 
The following table presents recognized derivative instruments (excluding embedded derivatives and associated reinsurance recoverables), and repurchase and reverse repurchase agreements that are offset in the Unaudited Interim Consolidated Statements of Financial Position, and/or are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in the Unaudited Interim Consolidated Statements of Financial Position.
 
 June 30, 2022
 Gross
Amounts of
Recognized
Financial
Instruments
Gross
Amounts
Offset in the
Statements
of Financial
Position
Net
Amounts
Presented in
the Statements
of Financial
Position
Financial
Instruments/
Collateral(1)
Net
Amount
 (in millions)
Offsetting of Financial Assets:
Derivatives$17,806 $(15,614)$2,192 $(1,030)$1,162 
Securities purchased under agreement to resell118 0 118 (118)0 
Total assets$17,924 $(15,614)$2,310 $(1,148)$1,162 
Offsetting of Financial Liabilities:
Derivatives$22,257 $(20,403)$1,854 $(1,854)$0 
Securities sold under agreement to repurchase8,006 0 8,006 (7,937)69 
Total liabilities$30,263 $(20,403)$9,860 $(9,791)$69 
 
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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
 December 31, 2021
 Gross
Amounts of
Recognized
Financial
Instruments
Gross
Amounts
Offset in the
Statements
of Financial
Position
Net
Amounts
Presented in
the Statements
of Financial
Position
Financial
Instruments/
Collateral(1)
Net
Amount
 (in millions)
Offsetting of Financial Assets:(2)
Derivatives$17,272 $(14,150)$3,122 $(802)$2,320 
Securities purchased under agreement to resell704 0 704 (704)0 
Total assets$17,976 $(14,150)$3,826 $(1,506)$2,320 
Offsetting of Financial Liabilities:(2)
Derivatives$19,587 $(17,314)$2,273 $(797)$1,476 
Securities sold under agreement to repurchase10,185 0 10,185 (9,699)486 
Total liabilities$29,772 $(17,314)$12,458 $(10,496)$1,962 
__________
(1)Amounts exclude the excess of collateral received/pledged from/to the counterparty.
(2)Excludes “Assets held-for-sale” with fair value of $1,643 million as of December 31, 2021 and “Liabilities held-for-sale” with fair value of $1,503 million as of December 31, 2021. See Note 1 for additional information.

For information regarding the rights of offset associated with the derivative assets and liabilities in the table above, see “—Counterparty Credit Risk” below. For securities purchased under agreements to resell and securities sold under agreements to repurchase, the Company monitors the value of the securities and maintains collateral, as appropriate, to protect against credit exposure. Where the Company has entered into repurchase and resale agreements with the same counterparty, in the event of default, the Company would generally be permitted to exercise rights of offset. For additional information on the Company’s accounting policy for securities repurchase and resale agreements, see Note 2 to the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2021.
 
Cash Flow, Fair Value and Net Investment Hedges
 
The primary derivative and non-derivative instruments used by the Company in its fair value, cash flow and net investment hedge accounting relationships are interest rate swaps, currency swaps, currency forwards, and foreign currency denominated debts. These instruments are only designated for hedge accounting in instances where the appropriate criteria are met. The Company does not use futures, options, credit, or equity derivatives in any of its fair value, cash flow or net investment hedge accounting relationships.
 
The following table provides the financial statement classification and impact of derivatives used in qualifying and non-qualifying hedge relationships, including the offset of the hedged item in fair value hedge relationships.


















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Table of Contents
PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)
 Three Months Ended June 30, 2022
 Realized
Investment
Gains
(Losses)
Net
Investment
Income
Other
Income (Loss)
Interest
Expense
Interest
Credited to
Policyholders’
Account
Balances
Policyholders’ BenefitsChange in AOCI(1)
 (in millions)
Derivatives Designated as Hedge Accounting Instruments:
Fair value hedges
Gains (losses) on derivatives designated as hedge instruments:
Interest Rate$13 $(1)$0 $0 $(126)$(159)$0 
Currency(5)0 0 0 0 (151)0 
Total gains (losses) on derivatives designated as hedge instruments8 (1)0 0 (126)(310)0 
Gains (losses) on the hedged item:
Interest Rate(13)3 0 0 138 173 0 
Currency7 3 0 0 0 151 0 
Total gains (losses) on hedged item(6)6 0 0 138 324 0 
Amortization for gains (losses) excluded from assessment of the effectiveness
Currency0 0 0 0 0 0 52 
Total Amortization for gain (loss) excluded from assessment of the effectiveness0 0 0 0 0 0 52 
Total gains (losses) on fair value hedges net of hedged item2 5 0 0 12 14 52 
Cash flow hedges
Interest Rate0 (1)0 0 0 0 (76)
Currency4 0 0 0 0 0 114 
Currency/Interest Rate44 68 391 0 0 0 1,277 
Total gains (losses) on cash flow hedges48 67 391 0 0 0 1,315 
Net investment hedges
Currency0 0 0 0 0 0 22 
Currency/Interest Rate0 0 0 0 0 0 0 
Total gains (losses) on net investment hedges0 0 0 0 0 0 22 
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate(3,640)0 0 0 0 0 0 
Currency(162)0 0 0 0 0 0 
Currency/Interest Rate646 0 3 0 0 0 0 
Credit(126)0 0 0 0 0 0 
Equity1,178 0 0 0 0 0 0 
Other1 0 0 0 0 0 0 
Embedded Derivatives1,542 0 0 0 0 0 0 
Total gains (losses) on derivatives not qualifying as hedge accounting instruments(561)0 3 0 0 0 0 
Total$(511)$72 $394 $0 $12 $14 $1,389 







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PRUDENTIAL FINANCIAL, INC.
Notes to Unaudited Interim Consolidated Financial Statements—(Continued)

 Six Months Ended June 30, 2022
 Realized
Investment
Gains
(Losses)
Net
Investment
Income
Other
Income (Loss)
Interest
Expense
Interest
Credited to
Policyholders’
Account
Balances
Policyholders’ BenefitsChange in AOCI(1)
 (in millions)
Derivatives Designated as Hedge Accounting Instruments:
Fair value hedges
Gains (losses) on derivatives designated as hedge instruments:
Interest Rate$27 $(3)$0 $0 $(267)$(317)$0 
Currency(30)(1)0 0 0 (207)0 
Total gains (losses) on derivatives designated as hedge instruments(3)(4)0 0 (267)(524)0 
Gains (losses) on the hedged item:
Interest Rate(27)7 0 0 285 332 0 
Currency32 3 0 0 0 204 0 
Total gains (losses) on hedged item5 10 0 0 285 536 0 
Amortization for gains (losses) excluded from assessment of the effectiveness
Currency0 0 0 0 0 (2)63 
Total Amortization for gain (loss) excluded from assessment of the effectiveness0 0 0 0 0 (2)63 
Total gains (losses) on fair value hedges net of hedged item2 6 0 0 18 10 63 
Cash flow hedges
Interest Rate(5)0 0 0 0 0 (134)
Currency4 0 0 0 0 0 144 
Currency/Interest Rate49 137 471 0 0 0 1,417 
Total gains (losses) on cash flow hedges48 137 471 0 0 0 1,427 
Net investment hedges
Currency0 0 0 0 0 0 10 
Currency/Interest Rate0 0 0 0 0 0 0 
Total gains (losses) on net investment hedges0 0 0 0 0 0 10 
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate(7,245)0 0 0 0 0 0 
Currency(371)0 (1)0 0 0 0 
Currency/Interest Rate786 0 4 0 0 0 0 
Credit(163)0 0 0 0 0 0 
Equity1,654 0 0 0 0 0 0 
Other2 0 0 0 0 0 0 
Embedded Derivatives4,866 0 0 0 0 0 0 
Total gains (losses) on derivatives not qualifying as hedge accounting instruments(471)0